IRS Reveals Which Tesla Models Qualify for the 2023 U.S. Tax Credit

The IRS has released which Tesla models will qualify for the 2023 tax credit

Tesla

As of January 1, 2023, Americans can claim a $7,500 tax credit when buying a Tesla (and other electric vehicles). The Inflation Reduction Act allows eligible buyers the opportunity to claim a clean vehicle tax credit of up to $7,500 under Internal Revenue Code Section 30D.

We knew this was coming, and it slowed demand as shoppers were delaying their purchases until the new year. However, Tesla introduced an end-of-year sale, discounting their vehicles by $7,500 to encourage people not to wait.

Tesla Models That Qualify for the Tax Credit

The Tesla discount disappears on December 31, 2022, and the new government tax credit kicks in. But it is important to note that not all Teslas qualify for the clean vehicle tax credit. Model S and Model X are not on the list of eligible vehicles due to price, but the rear wheel and long-range versions of the Model 3 did make the list if the manufacturer's suggested retail price is below $55,000.

Six versions of the Model Y also made the list. They include the all-wheel drive, long-range and performance versions in the five-seat and seven-seat variations. Interestingly, Tesla does not produce a Model Y Performance in the seven-passenger setup, but it’s available for credit.

The IRS appears to work closely with vehicle manufacturers to determine eligible models. This could be telling of what Tesla plans to offer in 2023.

We may not only see a seven-seater performance Model Y, but we may also see Tesla reintroduce the Long Range Model 3 or Model Y for under $55,000 in 2023.

The Model Y all-wheel drive, long-range and performance five-seat variants do not currently qualify for the tax rebate according to the IRS since their MSRP is above the $55,000 threshold. We'll have to see if Tesla makes any changes to these models to get them under the $55,000 MSRP limit.

Older EVs also Qualify

The tax credits are not just for vehicles purchased in 2023. According to the IRS’ website, purchases made between August 17 (when the legislation was announced) and December 31, 2022, may also qualify for a tax break. There is also a used EV tax credit allowing consumers tax credits for up to $4,000 or 30% of the cost of a used EV that’s at least two years old.

To check if your vehicle meets requirements, use the vehicle identification number decoder on the Department of Energy’s website.

What is the Inflation Reduction Act?

The government says the Inflation Reduction Act is “the most significant climate legislation in U.S. history.” It includes $739 billion aimed at “green power, lower costs through tax credits, reduce emissions, and advance environmental justice.” When announced, the government said, “It will offer new access to tax credits as well as grants and incentives to reduce air pollution.”

The Inflation Reduction Act also has several credits available for EV charging. There is a property credit for companies that install EV chargers. The IRS will offset up to 30 percent of the total costs of purchase and installation of charging equipment, up to $100,000 per charger. Experts believe this new legislation will help the U.S. reduce emissions by 40% by 2030.

Tesla’s More Affordable Vehicle Update: Q1 2025

@DominicBRNKMN/X

Alongside the many things we learned about Unsupervised FSD and the Robotaxi program, we also got to find out a little more about Tesla’s more affordable vehicle in the Q1 2025 Earnings Call.

There has been extensive reporting on what the long-anticipated affordable EV option would become, and we’ve seen numerous news stories mentioning that it was delayed or even arriving on time. The executive team revealed the near-term and long-term plans for Tesla’s upcoming vehicles, and there’s definitely good news to share here.

Updated Timeline

The most important piece of news is that despite all the talk of delays from supposed inside sources, Tesla has confirmed that the plan for its more affordable model remains on schedule for production to begin in the first half of 2025. Tesla’s executive team narrowed that timeline down further - and said that they expect production to kick off as soon as June and that the new model will be in the market shortly thereafter.

While the production timeline itself is on track, Tesla did note that the subsequent ramping process will likely be slower than initially hoped, citing global tariff and financial impacts as challenges to overcome to prepare its production lines.

Hybrid Production Approach

Tesla has once again confirmed that this will not be their next-generation vehicle, built using new production methods. Instead, they outlined a relatively more pragmatic approach for this new model.

Tesla will utilize aspects of both the next-generation platform as well as some parts of its current platforms (namely the Model 3 and Model Y). This means that Tesla will produce this new vehicle on the same manufacturing lines as the Model 3 and Model Y.

This strategy allows Tesla to bring the vehicle to the market more quickly, while also managing capital expenditures more efficiently by using existing infrastructure. However, Tesla’s executive team also noted that this approach, while faster, will result in fewer cost reductions than what might have been achieved with an entirely new platform and dedicated manufacturing process.

Vehicle Design

Using these existing production lines means that Tesla’s new vehicle will likely share some considerable similarities with either the existing Model 3 or Model Y. Rather than being a radically different and smaller vehicle, this new model will resemble the overall form factor and shape of Tesla’s current core offerings, while being optimized for a lower cost.

This doesn’t mean that Tesla is forgetting the overall goal here. Their ultimate goal is to reduce the initial cost of ownership and lower monthly payments for customers while maintaining a standard of excellence and safety.

Not Unboxed

Both at this Earnings Call and previous ones, Tesla has indicated that this new vehicle will not be using the innovative unboxed assembly method, at least for the time being. That relatively unique method will be developed and implemented specifically for the purpose-built Cybercab and for future vehicles on the next-generation platform.

We’re just a few days away from May, so it won’t be long before we see more about this upcoming vehicle. Stay tuned.

Follow

Follow

Follow

U.S. Announces New Autonomous Vehicle Framework and What It Means for Tesla

Not a Tesla App

In a follow-up move to the current US administration’s goals to introduce a federal framework for autonomous vehicles, the US Department of Transportation (USDOT) is loosening autonomy restrictions following an announcement from Secretary Sean Duffy on X. This new initiative helps streamline complex regulatory processes and foster home-grown innovation.

From the Wright Brothers to the first astronauts on the moon, our nation has always been at the forefront of transportation technology.

That’s why today we're unveiling a new Automated Vehicle Framework from @USDOT’s Innovation Agenda ⬇️ ⬇️ pic.twitter.com/W3kbMUwQSn

— Secretary Sean Duffy (@SecDuffy) April 24, 2025

Automated Vehicle Framework

As part of the broader upcoming USDOT Innovation Agenda, the newly unveiled AV Framework is designed to promote American innovation and strengthen domestic engineering while maintaining existing safety standards. The framework centers around three key principles:

• Prioritize Safety

• Unleash Innovation

• Enable Commercial Deployment

To kickstart this AV framework, USDOT announced two initial steps focused on streamlining processes and expanding opportunities.

Crash Reporting Requirements

Under the first principle to Prioritize Safety, the National Highway Traffic and Safety Administration (NHTSA) will maintain its Standing General Order requiring crash reporting on Advanced and Automated Driver Assistance Systems (ADAS and ADS). 

However, the reporting process will be streamlined following feedback from AV innovators, likely including Tesla. The goal here is to focus on collecting critical safety information while removing unnecessary or duplicative items from the reporting process, thereby reducing the burden without compromising safety.

Cutting Red Tape

Directly tied to the second principle of Unleash Innovation, the framework also seeks to slash red tape. The first step here is the expansion of the Automated Vehicle Exemption Program, or AVEP. This program allows manufacturers to petition for temporary exemptions from certain federal motor vehicle safety standards (FMVSS) for testing or deployment purposes.

Previously, the standard excluded domestically produced vehicles. Now, domestically produced AVs will not need to meet FMVSS, which will broaden the scope for manufacturers to test more innovative and unique designs and technologies.

Single National Standard for AVs

Finally, tied to the third principle of Enable Commerical Development, USDOT intends to move the United States closer to a single national standard for autonomous vehicles. This aims to prevent a confusing and inefficient patchwork of state-level or city-level laws and regulations, which can create hurdles for companies attempting to innovate, deploy, and scale their technology.

A unified standard across the United States also means that Canada and Mexico will likely be able to follow, as they share homologization standards across North America, including for vehicle crash safety and some autonomy regulations.

What This Means for Tesla

These framework changes will likely have a substantial impact on Tesla. The move towards a national standard is potentially the most impactful change, as Tesla identified regulatory hurdles as one of the most significant challenges it will face with the deployment of both Unsupervised FSD and its Robotaxi network.

The reduction of FMVSS requirements and streamlined reporting will likely play a role in the future as well. The FMVSS requirements are probably already being worked on, if not already met, by the Cybercab and other vehicles in Tesla’s lineup.

Meanwhile, the streamlined reporting will be helpful once Tesla officially launches its Robotaxi network in June.

You can read the official press release on the announcement here.

Follow

Follow

Follow